26.1 C
New Delhi
Sunday, October 17, 2021

THE COVID-19 EFFECT

Advertising Industry: Growth at best expected to be flat for calendar year 2020 and if epidemic comes under control by May/June, normal economic conditions could kickstart in Q3. Digital to remain largely unaffected, TV to stay resilient, while OOH expected to take a hit. 

Macro-economists in financial institutions, such as Standards & Poor, are now expecting global and US GDP growth to be flat at best for the full-year 2020 assuming the epidemic is under control by May/June and normal economic conditions resume in 3Q, generating some growth in the second half,” says a report by IPG Mediabrands’ Magna.

Digital media ad formats are likely to be least affected.

Magna, which curates and provides strategic media and investment intelligence for agencies and brands, in a new report examines in depth the impacts of COVID-19 on the global economy and the global advertising market.

The report also summarises the current economic forecasts for 2020 and what the industry could expect in terms of the serious impact of the Coronavirus crisis on business worldwide.

One particularly significant point the report makes is that the COVID-19 pandemic has brought to an end a long cycle of economic growth for the United States and the world in general.

Digital media ad formats will, however, be the least affected, in part, due to increasing digital media usage and eCommerce during the outbreak. That said, global digital advertising is expected to slow down to single-digit growth in CY 2020, compared to the over 20% growth per year in recent years, says the report.

The report says, “television may remain relatively resilient due to pre-existing spending commitments, viewing increases and the fact that core client verticals will be relatively unscathed”. On the other hand, radio ad sales are expected to suffer more as motorised commuting comes to a halt owing to lockdowns. OOH ad sales are also expected to be “severely hurt by the quarantines but may recover faster too than others”, the Magna report says.

Ten Key Points:

  1. The COVID-19 epidemic is now waning in China, proving that “extreme isolation” works and helps contain the contagion within 4 to 6 weeks. So, Europe and North America are likely to face at least five weeks of quarantines and business shutdowns that will certainly hit the economy, before business returns to normal.
  2. As the COVID-19 outbreak triggered a collapse of the stock markets, macroeconomists are revising downwards their forecasts for economic growth in 2020.
  3. Macroeconomists agree that a global recession in the first half (negative GDP growth inQ1 and Q2) could be followed by a recovery in the second half. Consequently, the global economy could stagnate in 2020, instead of growing by over 3% as reckoned previously.
  4. Western Europe, where the economy had already slowed down before the outbreak, is likely to fare worse. In over 40 years, China experienced negative growth in the first quarter while full-year growth is likely to hover between +3% and +5%, compared to +7% in recent years.
  5. Many sectors are likely to cut back on marketing and advertising spends this year in the wake of slower sales and profits. Magna says the impact on revenues is expected to be severe for the travel and hospitality industries, moderate for retail and automotive, mild for Consumer Packaged Goods (CPG/FMCG), and “potentially positive” for e-commerce and Home Entertainment (SVOD).
  6. Simultaneously, quarantine and social distancing policies will create significant changes in attitudes, social norms (remote work and even remote education), consumption (acceleration of e-commerce and online services), and media consumption (surge in TV viewing, OTT usage, and digital media). These attitudinal shifts are expected to (at least partially) stay beyond the outbreak and transform societies globally forever.
  7. In terms of (media owners’) advertising revenues, digital media ad formats will be the least affected, owing largely to organic growth factors, such as that of eCommerce. However, global digital advertising could slow down to single-digits this year, compared to the nearly over 20% per year in the last eight years, and over 12% in earlier Magna forecasts for the year.
  8. Among linear ad formats, TV is expected to remain resilient owing to committed spends and because its core verticals (CPG/FMCG) are not likely to be affected that badly by the outbreak and the economic slowdown.
  9. TV viewing (mostly news) has grown everywhere during the weeks of isolation, but a lack of fresh programming coupled with cancellation of sporting events could eventually limit overall growth.
  10. Radio ad sales, as discussed, could suffer more as automotive commuting comes to a halt for weeks while OOH media sales will take a big hit during the outbreak as rail stations and highways remain empty. However, OOH may recover faster than other media, primarily owing to its strong performance and client mix (technology).

Must Read

- Advertisement -spot_img

Archives

Related news

- Advertisement -spot_imgspot_img